Magellan goes with flow

Fund turns tide with $69.5b under management

MAGELLAN Financial Group has reversed the recent trend of money flowing out of the fund, recording net inflows of $218 million in June that helped push its funds under management to $69.5 billion.

The update comes just days after the fund manager’s shares were heavily sold off following a downgrade by brokerage Morgan Stanley, which raised concerns of the risks posed by the persistent slowdown in retail flows.

“We don’t think the market has considered the prospect of retail flows going negative,” Close Change Morgan warned.

Magellan recorded net retail inflows of $4 million in June, reversing the negative trend of recent months that saw retail outflows amount to $20 million in March, $64 million in April and $57 million in May.

Net institutional inflows, meanwhile, hit $214 million in June.

In a statement to the Australian Securities Exchange, Stanley analysts Magellan also announced it would pay distributions of approximately $755 million in July and its estimated performance fees would come in at approximately $40 million for the year ended June 30.

Morgan Stanley last week downgraded Magellan to underweight and slashed its price target to $20 on the risks posed by the slowdown in retail flows.

Its shares took a beating as a result, plunging more than 8 per cent.

Magellan’s retail pricing is also above key peers, raising risks of fee pressure, Morgan Stanley added.

“MFG (Magellan Financial Group) is maturing as a business with fewer meaningful growth options than in the past,” Morgan Stanley’s analysts said.

Magellan last week announced a new three-year pay deal for co-founder and star stock picker Hamish Douglass (pictured) that will see his remuneration capped at a maximum $7.5 million a year. This includes a fixed salary of $2.5 million and up to 200 per cent of the fixed remuneration based on the performance of the group’s global equity strategy.

Morgan Stanley also warned the departure of Mr Douglass posed a “key person risk” for investors in Magellan stock.

Shares in rival Platinum plunged 20 per cent back in February when its founder Kerr Neilson announced he was stepping back from the chief executive role.